ISLAMIC FINANCE - Unconventional exposure

Derivatives seem an anathema to Islamic finance: they exist only on balance sheets, are dependent on other product movements and are frequently used for speculation. But they are also vital for hedging – provided that banks understand them and that scholars agree on what structures are permitted. Chris Wright sneaks a peek at the contentious issue of interest in Islam.

14 Mar 2007

The financial tools available under Islamic shariah law have been growing in complexity and abundance. Most market participants understand that a Shariah-compliant bond can work, and that a home loan also makes sense. But when it comes to shariah-compliant derivatives, it's a different matter.